With Elon Musk’s Department of Government Efficiency (DOGE) reportedly on track to save hundreds of billions of dollars annually, one outspoken U.S. economist explained how cutting costs can paint a harsh reality for the economy.
“Trump is not fully aware of how these serious (and needed) cuts in federal spending will very likely tip the economy back toward recession,” Harry Dent told Fox News Digital. “Secretary of the Treasury Bessent is warning there may be some pain, but the $2 billion intended cuts would be 7% of GDP and enough alone to cause a recession.”
“Such a recession would be worse than most economists think as our economy has been stretched beyond compare with $27 trillion in combined fiscal and monetary stimulus since 2008, and still rising $2 trillion or so a year from record deficits despite monetary stimulus being pulled back,” he noted.
“It’s good to make such cuts, but naïve to underestimate the economy’s ability to absorb them at this time.”
D.O.G.E. HONING IN ON FEDERAL CONSULTING CONTRACTS; WANTS WASTE IDENTIFIED
Though DOGE’s mission to cut federal budgets, fire employees and gain access to potentially sensitive information has received widespread criticism from politicians and average Americans alike, the department is claiming its measures have netted $115 billion in savings.
A combination of canceling contract leases, stopping fraudulent or improper payments and canceling grants is reportedly what led to the figure, according to DOGE’s website.
The estimated $115 billion in savings will save an average of $714.29 per taxpayer, based on the 2022 figures of 161 million individual income taxpayers.
Dent encouraged Musk to make budgeting decisions with a fine-tooth comb, as he sticks to his outlook that an economic downturn will hit the U.S. economy between 2025 and 2027.
“My expertise was turnaround management. The secret of that is not just slashing costs, okay? You go in, it’s always in the fixed costs. The background overhead is where 90% of the waste is,” Dent told Fox Digital in a recent interview.
“I like change, and I can make 10 times the change in half the time if something’s failing than if it’s sailing along and you got to fight inertia, and people don’t want this. And the change is always disruptive,” he added.
A Harvard Business School graduate, the now-economist’s first job after college at consulting firm Bain & Company was similar in principle to Musk’s role at DOGE, he pointed out.
“You have to go in there and find out what’s really causing those costs and cut those fixed costs. In other words, you have to do a surgical cut,” Dent said.
“I could go into a healthy business and cut 20% in a heartbeat out of their fixed cost. And I can go in an unhealthy business, what I used to [do], and cut 50% of the fixed cost and that makes you lean and mean,” he expanded. “That’s what we need.”
A White House spokesperson told Fox News Digital in a statement: “President Trump is reining in excessive, wasteful spending as it is necessary to tame inflation and normalize interest rates. The President’s broad economic agenda making tax cuts permanent, establishing fair and balanced trade, unleashing American energy and innovation, and aggressive deregulation will result in greater investment and opportunities in the private sector, especially for small businesses. President Trump is ensuring our economy’s long-term success so that Americans now and for generations to come can live the American Dream.”
Though it seems to Dent that Musk – for the time being – is “mindlessly” making government savings moves, “it’s better than nothing.”
“We don’t need to say, ‘We’re just going to cut this whole department, we’re just going to cut 50% of this department,’” the economist posited. “That’s not the way to cut costs. And so I would say Musk, with all his experience, did not get a lot of it in the turnaround side like I got. And I didn’t intend to get it, but I got it in spades.”
“And anybody [who’s] been around in turnarounds would tell you that you cut selectively to make yourself healthy. You don’t cut out of panic to keep from just dying,” Dent continued.
Musk exclusively told FOX Business’ Larry Kudlow that his team does its best to remain “transparent line-by-line” on what federal expenditures it plans to slice.
On Fox News’ “Special Report with Bret Baier” Thursday, Musk said, “We want to reduce spending by eliminating waste and fraud and reduce the spending by 15%, which seems really quite achievable… The government is not efficient, and there’s a lot of waste and fraud. So we feel confident that a 15% reduction can be done without affecting any of the critical government services.”
But reviving the “most overstimulated economy” that Dent has lived in could take some time, as he believes some fiscal pain must be felt to fully bounce back from artificial stimulus spent in reaction to the pandemic.
“People are going to lose jobs in certain industries and stuff. But it has to happen, and it is [a] benefit for the long term. And it’s even good for the people in these older industries. It’s good to get kicked out because they’re going to be forced to retrain and get new skills and get into the new economy, because… all new economies, no matter how much they threaten the old, always make us richer, and I mean a lot richer,” he argued.
“Most likely, it should have happened [in] 2022, ’23, that was when the demographics were still weak,” Dent pointed out. “That was the perfect time. But we rode over. It was tenuous… We’re finally shaking out and getting ready for the millennial boom. And we can go into it healthy instead of crippled.”
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FOX Business’ Michael Dorgan contributed to this report.
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